Topic: Coverage & Claims

Insurance and Reinsurance Newsletter – September 2017

Locke Lord’s Insurance & Reinsurance Newsletter provides topical snapshots of recent developments in the fast-changing world of insurance. For further information on any of the subjects covered in the newsletter, please contact one of the members of our Insurance team.

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Uncertainty Surrounds New Texas Insurance Law: Divergent Views Emerge on the Impact of the Texas “Hail Storm Bill” on Hurricane Harvey Claims

As we reported here in May, the Texas Legislature recently passed legislation (House Bill 1774, a copy of which can be found here) which amends Chapter 542 of the Texas Insurance Code—Texas’s general prompt pay statute for insurance claims.

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Michigan Federal Court Finds No Coverage for Policyholder Duped By Fake Email

A policyholder was tricked by emails ostensibly from a vendor invoicing for work provided and sent $800,000 to the fraudster’s account.  In an action filed by the insured, a federal district court for the Eastern District of Michigan has agreed with the insurer there is no coverage for the loss.  The policy’s “computer crime” insuring agreement goes to “direct loss” of money “directly caused by” the “use of any computer.  According to the court, there were “intervening events between” receipt of the emails and transfer of the funds which “preclude a finding of ‘direct’ loss ‘directly caused’ by the use of any computer.”  The court, citing other jurisdictions’ cases about fraudulent emails, said “there was no infiltration or ‘hacking’” of the insured’s computer system and that the emails, although received via computer, “did not directly cause the transfer of funds.”  Instead, the policyholder itself took all the steps to effect the dispatch of the funds based on information in the emails. American Tooling v Travelers (E.D. Mich Aug. 1 2017). v. Travelers Cas. & Sur. Co., No. 16-12108 (E.D. Mich., Aug. 1,...

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NY Federal Court Finds Coverage for Policyholder Duped By Computer Fraudster

A policyholder was hit by a fraudster that developed emails mirroring the format of the company’s emails and showing knowledge of sensitive company details. Because of the ersatz emails, company employees were tricked into arranging a $4.8 million wire transfer to the perpetrator’s account. The federal district court for the Southern District of New York found coverage for the policyholder. The judge distinguished other recent decisions, finding “coverage [under the computer fraud coverage section] fraud where the perpetrator violates the integrity of a computer system through unauthorized access ….” According to the opinion, the funds transfer coverage section also applies because the thief impersonated an authorized representative and prompted company personnel to effect the wire transfer. Medidata Solutions Inc. v. Federal Ins. Co., No. 15-cv-907 (S.D.N.Y., July 21,...

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